Cash Flow is one of the most crucial measurements of your company’s financial health.
So then why do so many business leaders ignore it?
At the end of the day, the amount of money you bring in is meaningless if you’re not monitoring the amount of money leaving your accounts.
In fact, negative cash flow is one of the telltale signs that a business will go under.
Because here’s the thing…
Your income statement alone is not enough to understand whether your company is truly financially healthy. While an invoice creates an opportunity for revenue, receiving hard-earned cash is what seals the deal.
4 tips to help you manage your cash flow so you can operate a business that’s truly in the black:
1. When it comes to cash flow, consistent monitoring is key
Monitoring cash flow isn’t a “set it and forget it” kind of game.
You should make sure to review it regularly, and as often as every week in the very beginning.
The more you dive into the statements, the more comfortable you’ll get with the numbers and what they’re saying. What’s more, you’ll start to recognize patterns in your cash flow that can either help pinpoint opportunities for optimization or indicate early warning signs of potential issues.
2. Getting a line of credit now will go a long way later
You may think a line of credit isn’t necessary if cash is coming in. But that couldn’t be further from the truth. In fact, you should secure a line of credit before an issue arises, so you’re prepared in the event that cash dries up.
This is why it’s so important to understand your current cash flow and analyze a forecast that projects at least six months into the future. If it appears that there could be a dip in your inflow, you’ll want to cover all your bases preemptively to make sure you’ve got enough to make payments on time no matter what.
3. Invoice management is a proactive affair
Managing your invoices is crucial to making sure that cash is flowing in at a healthy, consistent pace. While it seems like an easy enough process, too many business owners think that the accounts receivable cycle ends when they send an invoice out.
But the reality is that’s just the beginning. And forgetting to follow through on collections or turning a blind eye can result in gaping holes in your cash flow statement.
By managing invoices, you’ll know when to offer incentives such as discounts for early payments.
Don’t have the time to deal with all the paperwork? Hire an expert who can make sure you’re getting paid at the right time to stay afloat.
4. Relationships with vendors can be a saving grace
Sure, cash flow is a numbers game.
But like everything in business, positive human relationships can go a long way toward promoting success.
Spend time developing those positive relationships with your vendors, and over time you’ll discover just how beneficial this can be to maintaining healthy financial statements.
For example, they’ll be more likely to accept negotiations around discounts, and might be more open to allowing a payment plan or credit card payment when you’re in a crunch.
Hiring an expert can be a game-changer for your success
When you put these four tips into practice, you’ll give yourself one of the biggest advantages a business needs: the gift of flexibility.
If you understand the importance of cash flow but just don’t have the time to deal with it, then hand it over to experts. Hire a bookkeeper today and we’ll take care of the numbers for you… So you can rest assured you’re in good hands while staying focused on your business.